5 Tips For Avoiding Financial Stress
A recent study by Northwestern Mutual found that over fifty percent of people have anxiety about money either “all the time” or “often.” That’s a lot of stress. Feeling that way about your finances can hurt other areas of your life as well. The good news, however, is that there are things you can do to avoid financial stress.
Nine out of ten people say that knowing their finances are in order makes them feel happier and more confident. This means that it’s less about how much money you make, and more about how your money is managed that is going to have the biggest impact on your financial stress level.
With that in mind, here are five tips for avoiding financial stress you can implement, regardless of how much money you make.
1) Focus Only On Your Most Important Goals
People often feel defeated by money because they try and save for too many things at a time, and end up not having enough money for any of them.
Instead, try narrowing your focus down to just a few of your most important financial goals. Focusing on a smaller number of goals allows you to see progress happen more quickly and is more likely to keep you motivated to complete them.
Thinking about your financial goals should make you feel happy, not anxious.
2) Break Large Goals Into Smaller Steps
The idea of breaking large goals into bite-size steps is not new. But one of the best explanations of the concept ever comes from Hollywood legends Richard Dreyfuss and Bill Murray in the movie What About Bob?:
So, instead of thinking about the ten-thousand dollars you need to remodel your kitchen, focus on saving two-hundred dollars each month.
3) Automate Your Savings
It’s easy to forget to transfer money into a savings account each month. To simplify the process, use online banking to automate transfers from your checking account into your savings account. What’s nice about automating your savings this way is it tends to put it out of your mind, which is a good thing.
By automating your savings, there’s less risk of you deciding to spend the money on something else instead.
4) Build A Safety Net
A big component of financial stress is often worrying about what will happen to family members if something should happen to you. Knowing your family will be taken care of in the event of an emergency can go a long way to reducing financial stress.
Generally speaking, there are three components you should include in your financial safety net:
- Emergency Fund
- Insurance Coverage
- Estate Plan
Emergency Fund: A good target is to have enough money saved to cover six months of expenses.
Insurance: Most people already have auto and either homeowners or renters insurance. You should also consider both disability insurance and life insurance if you don’t have those yet. Make sure any current coverage you have is enough.
Estate Plan: Lots of people think putting together an estate plan is complicated or only for the super wealthy. But an estate plan is simply making sure that your wishes for your health, your kids and your assets are spelled out so that there’s no confusion over what to do should something happen to you.
5) Make A Financial Plan
If you’ve already done any of the previous steps, then you’re already well on your way to having a solid financial plan in place.
A financial plan is a guide to achieving the goals you’ve set for yourself and includes the steps you need to put in place to see them through. Once you have a plan in place, you’ll reduce financial stress.
If you’re not sure where to go from here, consider talking to a financial professional. At Miles Brown, we can help talk you through your priorities, work with you as they change, and help you feel happy knowing you’re making progress on your goals.
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